3 Minute Gold News – Jim Rickards – Gold – Aug. 26, 2016

3 Minute Gold News

A synopsis of an interview with Jim Rickards, New York Times bestselling author of The New Case for Gold, The Death of Money and Currency Wars, by Albert Lu of The Power & Market Report.

Jim is the editor of Strategic Intelligence, Chief Global Strategist for West Shore Funds, former general counsel for Long Term Capital Management, and a consultant to the U.S. Intelligence community and U.S. Department of Defense.

by: Elaine Diane Taylor

Topics:

Jim Rickards

The definition of a commodity is a generic input into another process.

Oil is a commodity because you use it in industrial processes and copper is a commodity because you use it in electronics.

Gold has very few industrial applications and isn’t actually good for anything except money.

There’s a high demand for gold jewelry, but jewelry is really just wearable wealth. It looks pretty but it’s really a store of wealth.

Jewelry has value added above bullion but they’re really in the same category as a store of wealth.

Sometimes gold is viewed as an investment. But gold isn’t really an investment because it has no yeild.

Investments have yield — you take a risk and you are rewarded.

Take a dollar bill out. What’s the yield? Nothing.

The yield is nothing because it’s money and there’s no risk.

If you want yield you have to put it at risk in the bank or by buying a stock, for example. Putting money in the bank is a risk because you are an unsecured liability of a possibily insolvent financial institution.

That’s what a bank deposit is.

A bank deposit isn’t really money because of the risk. If the bank wants to shut its doors or the deposit insurance runs out, or you have a total in excess of the deposit insurance or they do a bail-in,,./ then you’re going to discover the hard way that it’s not money.

It doesn’t mean not to put money in the bank, it just mean not to think of it as money when you deposit it. It’s an investment.

Gold isn’t an investment because there’s no risk and no yield.

So what’s money?

You dont’ have money in the stock market or the bond market — those are stocks and bonds.

A money market fund also isn’t money. A government will uses things as money to calculate M1, M2 etc. but it’s not legally money.

The only thing that’s money is currency in your hand. Everything else, apart from gold, is one step removed from that.

And the only thing backing up the currency, stocks and bonds is one thing — confidence.

But confidence is fragile and can be lost quickly and not return. And there are people who don’t understand that it’s fragile and can abuse the system and destroy that confidence. At that point what was once money will not be money anymore.

But that won’t happen to physical gold. Gold is the one form of money that people always have confidence in because there’s no risk of it being abused by someone else.

SOVEREIGN DEBT

The sovereign debt that exists in the world today is impossible to pay back.

Mathematically impossible.

The only way out is some combination of default, inflation, taxation and/or confiscation — all just ways of taking your money.

What can a person do to protect their wealth in this state of the world?

The answer is gold.

Jim was doing work for the CIA and Central Intelligence community in 2004 doing financial warfare and counter-terrorism.

Gold was the only way that Jim could see to preserve wealth given the instabilities in the financial system.

MONETARY ELITES

The elites will not give you the straight story.

Jim talks to people like top officials at the IMF, U.S. Treasury, Federal Reserve, Bank of England, Bank of Japan, China Investment Corporation, government officials, academics and others all over the world.

What they say publicly is diffferent than what they tell Jim privately.

They either really don’t get what’s going on or else they do get it but they can’t say.

The vast majority of the people in the world are relying on their central banks, finance ministries and treasury officials. They’re relying on their elected officials to look out for them.

But those officials are either working with the wrong models, they don’t get it, or they do get it and they won’t say.

There’s a great deception and a lot of lying going on.

There’s some denial and some outright lies.

People are hungry for information and they feel like they’re being lied to. Very few have the expertise to understand what’s going on — and why should they?

If you’re a successful auto dealer or dry cleaner you’re not a PhD in economics. You rely on the banks and the governments.

Well, that trust has been destroyed.

What do you do?

That leads back to gold.

Who are the elites that get it? There’s Christine LaGarde, David Lipton, Lael Brainard, Stan Fischer, Bill Dudley. They get it. The Chinese Central Bank, the Russian Central Bank and Mario Draghi at the European Central Bank get it.

Jim’s not sure if Janet Yellen gets it or not. She’s very intelligent but is married to her economic models.

But even though these people get it they believe they can fix it. They see that the system is broken but they believe they can save the world.

They’ll tell you, “Don’t worry. It’s all good.”

Maybe there’s some denial there.

But maybe this thing is really just hanging by a thread and they believe that if they say it’s really bad then it will be a self fulfilling prophecy.

If the system is built on confidence then maybe they believe they have to be responsible for what they say because they could start the panic that they fear.

Maybe they believe the panic that they fear will happen and perhaps know will happen could be started by them if they speak honestly about it.

It’s a strange job description to have to lie to people for their own good.

But it’s not for the people’s own good. When you lie you do it for your own good.

Perhaps these officials who are in charge of the world’s current monetary system believe they have to lie to everyone. Maybe they think they’re smarter than everyone and that they’ll just lie to people for their own good while they fix it.

That’s a dangerous way to go about your business.

INFLATION

The Fed wants inflation. They have a 2% inflation target.

They haven’t come close to their target in six years.

They have to weaken the U.S. dollar in order to get inflation and one way to a weaker dollar is to not raise interest rates.

In the next year you should look for a stronger dollar price for gold, a stronger yen, stronger euro, a weaker U.S. dollar and a weaker yuan that’s pegged to the weaker dollar.

If the Fed interest rate policy means no increase or maybe even a rate cut back to zero then Wall Street will like that.

Plus, surprises along the way like a Brexit or Turkish coup tend to make the dollar stronger in the short run.

But in the long run we’ll get inflation, and that’s bad for capital formation which in the long run is bad for stocks.

The Greek bank holiday and long lines to get a few euros for the day. Debt deals behind closed doors. The media telling us what opinions to have. China building islands in the South China Sea and claiming all the international waves. More dealing to come. More standing in line for those who owe. Who owes? There’s a long line of nations in debt and this is far from done.

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Preparing for the Fall live boutique album available on iTunes — featuring Wag the Dog, Black Swan Dive, American Pie and Gods of the Copybook Headings.

The copybooks of the early 1900s gave us all the wisdom we need. The sayings that were copied are the truths, the gods, of our world. All the empires who followed the gods of the marketplace instead have fallen, and there’s terror and slaughter when the gods of the copybook headings return. The lyrics are by Rudyard Kipling. One of my gurus.

See the bankers wave their Wall Street wands and conjure piles of paper green. Naked short selling is like betting that your neighbour’s house will burn down. But in this scenario it happens to burn down. If the bankers win then we lose the whole world as we know it. I wrote this in 2009, with a lyric “A little grease (Greece) is floating out to sea, and little pigs (Portugal, Italy, Greece and Spain) are bobbing up and down, they’ll send a storm and we’ll see, when the tide goes out who’s naked on the beach“, and it’s coming on now. The world is changing as we know it.

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Nothing on this site is intended as individual investment advice. We’re all watching which way the wind is blowing.